BlackRock to launch first China ETF product this year: sources

Hong Kong

BLACKROCK plans to launch its first product in China's US$220 billion onshore exchange-traded fund (ETF) market later this year and has started hiring staff accordingly, 2 people with direct knowledge of the matter told Reuters.

The world's largest money manager, which thrives on the rise of passive investing with 70 per cent of its US$10 trillion global portfolio in ETFs and index funds, will be the first wholly owned foreign fund manager to tap the onshore Chinese ETF market.

Currently, the US firm manages overseas assets of a handful of China's large state-backed investors such as the country's sovereign wealth fund and national pension fund via offshore units, as all products sold are foreign-domiciled.

The first BlackRock ETF product launch is scheduled for the fourth quarter, said the people, which will add to 6.8 billion yuan (S$1.5 billion) worth of assets BlackRock manages through 2 mutual funds with investments in Chinese and Hong Kong stocks.

Several index providers have started talks with BlackRock but the fund manager is yet to decide which index to track for the first ETF product, the people said.

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Options under consideration include a carbon neutrality-themed index composed by China Securities Index, one of the people said. China has seen dozens of environment-linked ETF launches in the last 2 years betting on buoyant new-energy stocks.

"BlackRock is committed to helping more Chinese investors achieve their financial goals by bringing them a broader suite of investment products and solutions, including ETF and index investments," the company said in a statement to Reuters. It said it is "investing in more local talent" to support its "growth priority". China Securities Index did not immediately respond to a request for comment.

BlackRock's planned foray into the fast-growing Chinese ETF market comes against the backdrop of continued opening up of the financial market in the world's second-largest economy.

The move will also bolster the fund manager's presence in China, after it became the first global asset manager licensed to start a wholly owned onshore mutual fund business in the country last year.

BlackRock's ETF operation in China is set to open doors to local institutional as well as retail investors.

China's nascent US$220 billion ETF market with over 600 products as at the end of 2021 has only in recent years started contributing meaningfully to a global passive fund boom that catapulted the sector beyond US$10 trillion in value.

Assets in China's onshore ETFs expanded 30.5 per cent in 2021, almost on a par with the 31.9 per cent growth rate of US ETFs, but better than European peers' 24.7 per cent growth, showed data from the Shenzhen Stock Exchange.

BlackRock's iShares, which "remained a significant growth driver" in 2021, according to chairman and chief executive Larry Fink, drew in US$306 billion assets last year, accounting for 57 per cent of new money into all of the firm's active and passive offerings.

For its China ETF foray, BlackRock is recruiting for roles across ETF portfolio management, operations and focused marketing, said the 2 people. The firm initially plans to form a team of 5 to 6 employees, they added.

Measures to stop the spread of Covid-19 have largely curbed business activity in Shanghai, with candidate interviews being moved online, 1 of the people said.

BlackRock's Shanghai office currently has at least 70 staff, showed fund association data, and is set to recruit over 15 more, excluding the ETF hires, company job adverts showed. REUTERS